Column: America's other deficit

The sense in Washington -- and, it seems, in the country -- is that the government's New Year's resolution should be same as everyone else's New Year's resolution: Lose some weight and get fit.

Of course, the government is constantly talking about losing a few inches around the deficit. What worries me, though, is that the "get fit" part will get forgotten. The government can no more cut its way to a strong economy than a person can starve himself to health. Andy Stern, the former president of the SEIU and a member of the president's fiscal commission, nailed the point in his dissent to the commission's final report. America, he said, has two deficits: The budget deficit we're all used to hearing about. And the investment deficit that often goes unmentioned. And both need to be addressed.

The two deficits are more alike than people realize. Larry Summers, the outgoing director of the National Economics Council, explains it well: "You run a deficit both when you borrow money and when you defer maintenance that needs to be done. Either way, you're imposing a cost on future generations." A dollar in delayed road repairs and a dollar in borrowed money are not, in other words, that different: Both mean someone is going to have to spend a dollar later. In 2011, America should stop passing that buck.

Infrastructure is the easiest place to start. The American Society of Civil Engineers estimates that the nation needs about $2.2 trillion in infrastructure repairs and upgrades merely to bring the existing infrastructure up to "good condition." But has America's rallying cry really gone from "We're No. 1" to "We're only $2.2 trillion away from good condition"? How inspiring.

Our runways are clogged, our rail system is decrepit, and our levees - well, the ASCE gave our levees a D-minus - and its report came out four years after Hurricane Katrina. But in 2011, infrastructure is more than roads, rails and runways. The United States lags the rest of the developed world in broadband speed, penetration and cost. The country has no smart grid to speak of. We don't just need to bring our infrastructure up to "good condition." We need to make it better.

Here's the good news: Infrastructure investment is the best deal in the economy right now. Government borrowing costs are lower than they've been since the 1950s. Unemployment in the construction sector is above 15 percent, which means companies are desperate for work and bids to complete projects are coming in low. A weak global economy means cheap raw materials. Bottom line? These investments are more affordable now than they're likely to be in a few years. We'd be foolish to miss this opportunity.

But it's not just our physical capital that needs investment. Our human capital does, too. Our schools spend a lot of money but fail a lot of children. We don't have a national system of pre-kindergarten, despite an almost endless amount of evidence that pre-K education has huge returns for every dollar spent and is probably the single most valuable investment we could make in the country's future. We know that the value of a college education has increased in recent decades but that the percentage of Americans who graduate from college has stagnated - a trend that economists Claudia Goldin and Lawrence Katz estimate accounts for about two-thirds of the run-up in our skyrocketing income inequality.

Then there's intellectual capital. Research and development are good things in normal times but are even more necessary when the 10 hottest years on record have all been within the past 13 years and every attempt to price carbon has fizzled in the Senate. We either innovate our way out of climate change, or we're not getting out of it. And though this will come as, ahem, cold comfort to those of you who've spent the past week in a Sisyphean struggle with the snow on your walk, 2010 looks likely to be either the hottest or second-hottest year on record. We need to be spending a lot more on a Manhattan Project for renewable energy, routed through a professional, independent agency modeled on the National Institutes of Health.

Not all of this requires new money. In many cases, what's needed is not money at all, but the resolve to make difficult decisions to close, simplify or, at the very least, rigorously evaluate existing programs.

Take broadband. The Federal Communications Commission is responsible for the Universal Service Fund, which collects almost $8 billion annually to subsidize rural telephone lines. You might wonder whether - in an age when voice-over-Internet services are both common and cheap, when cellphone coverage is almost everywhere and when online connectivity is an economic necessity - that money shouldn't be going to broadband coverage. As it happens, pretty much everyone wonders this. The problem is that attempts to do anything about it have been fought by rural telephone companies and their allies in Congress.

Or education. One common refrain of employers is that we don't graduate enough science and engineering majors. When he served on the president's fiscal commission, Dave Cote, chief executive of Honeywell, made this a big theme. Working with Sen. Tom Coburn and Stern, he identified 110 programs meant to increase the number of science and engineering graduates - but no data on whether they were working.

Sen. Kent Conrad, chairman of the Budget Committee and a fiscal commission member, made a similar point about job training: "There were over 40 different job training programs, with very little coordination between them, and different definitions of who was eligible. And there were almost no metrics on any of them."

The government's problem with self-evaluation - and thus with self-improvement - has been noticed outside the fiscal commission, too. Michael Greenstone, director of the Hamilton Project, remembers his time as chief economist for the president's Council of Economic Advisers. "In the first year of the Obama administration," he says, "I appointed myself to run around and argue that the stimulus was the greatest opportunity for evaluation of federal programs that's ever happened. But the federal government is not equipped to do that. No one is against it, really, but it's not a priority. It's not part of the culture. And so it doesn't have the sense of urgency that running a fit government would require."

The problem, Greenstone continues, is that the government simply doesn't have good data on what works and what doesn't. But there's a solution. "We should take one-half of 1 percent of funding for every program and use it for evaluation," he says.

For the federal government, it's the equivalent of stepping on the scale everyday. And if you'd resolved to lose weight and get fit, isn't that how you'd start?

"Our schools spend a lot of money but fail a lot of children. We don't have a national system of pre-kindergarten, despite an almost endless amount of evidence that pre-K education has huge returns for every dollar spent and is probably the single most valuable investment we could make in the country's future. We know that the value of a college education has increased in recent decades but that the percentage of Americans who graduate from college has stagnated - a trend that economists Claudia Goldin and Lawrence Katz estimate accounts for about two-thirds of the run-up in our skyrocketing income inequality"

It's not the schools failing, it's the parents, or more accurately the parent. There is a direct correlation in every state between the out-of-wedlock birthrate and the worst school systems. Niether teachers nor administrators, nor money can change things in places where the above is running over 70%!

Also we have too many people going to college, racking up about one trillion in debt for jobs that don't require that type of education. Worst offenders are the online diploma mills like the University of Phoenix online, and the Post's own Kaplan which exist mainly to suck loan money out of the govenment not to educate. Graduation rate at Phoenix? 16%!

"What are these conservatives so bitter about? Are they all divorced alcoholics with hemmorhoids?"

They're bitter about their money being stolen and more or less wasted.

Government at all levels is projected to spend $6.7 trillion this fiscal year, and many of the government's biggest priorities remain our worst problems.

The $500 million LA school Krazen refers to is one of many egregious examples. The place costs more than a stadium, and has faculty dining room that is "better than most restauraunts". As the article below notes, there are similar examples all over the country.

Funny that the LA school example you give is an example of LOCAL government priorities. Exactly where conservatives are always saying priorities should be decided. And gee, how terrible, spending money on a school! Good heavens, what a waste!

If you want to look for ways to cut spending, how about we stop spending as much on defense as the next 20 countries in the world combined. But of course Republicans will never allow a single dollar to be cut from the defense budget.

NEW BRUNSWICK -- The brand-new, $185 million public high school in New Brunswick will have energy-providing solar panels on the roof, state-of-the-art lighting for its athletic fields and touch-sensitive, internet-connected "Smart Boards" instead of traditional blackboards.

But when it opened last week, it didn’t have a couple of comparatively low-tech necessities — a crosswalk and a stoplight.

"The $500 million LA school Krazen refers to is one of many egregious examples."

It is, but not for the reasons you think. Here in Minneapolis, we dumped a *ton* of money into our fancy new library designed by César Pelli. When there was (predictably) no funds to operate the thing, people started grumbling. But the problem wasn't "wasted money," it was how we finance our local governments -- through property taxes and fees. No other tax is worse at concentrating wealth and creating incentives for pushing high-service, high-cost people out of less-powerful cities. And, it's at its breaking point, since state governments relentlessly push services down to the local level so conservatives can say they "cut services."

So yeah, between the choice of (1) giving voters the choice to build fancy new things and crossing our fingers that crumbling local budgets can operate them and (2) letting local services and schools crumble altogether, at least (1) creates some institutional push-back against the budgetary slash-and-burn going on.

It's a severely messed up system, but it's not messed up *only* because the price tag of the projects is so high.

Yes BUT, if you do the research you will find that this is not a case of inadequate access to abortion, birth control, or lack of sex education, but a conscious way of life handed down through generations.

If it was any of the former, then you would see it usually being isolated to one child, when in reality in most cases it is multiple births to the same women in the same families in the same manner.

That's what makes it so hard to change. It's not ignorance, it's choice.

"Yes BUT, if you do the research you will find that this is not a case of inadequate access to abortion, birth control, or lack of sex education, but a conscious way of life handed down through generations.
That's what makes it so hard to change. It's not ignorance, it's choice."

i do agree with you, that there are many complex causes.
but i do know, that without the ability for women to terminate unwanted pregnancies, the situation would be much worse than it already is.
to my mind, there can be no doubt about that.

but i do agree with you, that there are many issues that are intertwined.
i also know that it is incredibly hard for a woman, who is not capable of caring for herself or a child, not to have to depend on resources, often outside of her family.
when that happens, it becomes a problem for society, and a danger for the wellbeing, not just of her, but for the child.
i am thankful that women can make their own choices, and i hope that right will be preserved for us, always.

"Funny that the LA school example you give is an example of LOCAL government priorities. Exactly where conservatives are always saying priorities should be decided."

Maybe some conservatives - I'm in favor of cutting government drastically at all levels.

"And gee, how terrible, spending money on a school! Good heavens, what a waste!"

It is absolutely a huge waste. More money on a school - in a system which has a dropout rate of 35% - than a stadium? With a faculty dining room that is nicer than a restaurant?

The waste occurs at all level of government, and it's due to the nature of the beast. It's a lot easier to blow $500 million on a school if you're a government official and can use state coercion to provide additional funding than if you're a private business owner who needs to convince customers of the value of your product.

"If you want to look for ways to cut spending, how about we stop spending as much on defense as the next 20 countries in the world combined. But of course Republicans will never allow a single dollar to be cut from the defense budget."

Most Republicans won't, but as a libertarian I wouldn't lose a night's sleep if it the military budget were cut in half this afternoon.

"The waste occurs at all level of government, and it's due to the nature of the beast. It's a lot easier to blow $500 million on a school if you're a government official and can use state coercion to provide additional funding than if you're a private business owner who needs to convince customers of the value of your product."

That's just simply false and misunderstands the situation. The projects are funded via bonding. Voters like new shiny things, so they vote for them. That's not coercion, but it's not good budgeting, either.

*BUT* conservative politicians refuse to adequately fund government, so state governments push services down to the local level (here's MN -> http://www.mn2020hindsight.org/wp-content/uploads/2010/02/2008citypropertytaxtrends1.jpg) I defended bonding in that last comment because it's the only way left to push-back against that slash-and-burn mentality: it's more difficult to eff over local governments when there's a new bajillion-dollar school, you know? Still, it's the lesser of two very big evils. The whole system of funding state and local government is totally messed up.

In my perfect liberal local government utopia, half of each state's cities would be abolished or combined, land use would be done at the state level, and there'd be a whole lot less property taxes. The economies of scale in providing services (water, sewer, etc) and the reduction in labor inefficiencies that result passing off high-service/high-cost people to poorer areas would both greatly reduce government spending (even though it might anger libertarians that the central state government would have a lot more power).

Right now, people vote on behalf of their property-rich communities for fancy things to enrich their communities. They wouldn't do that if their budgets/services were more tied to their neighboring cities. Fewer powers given to cities and local governments would make libertarians *and* liberals happy, and it'd reduce these types of projects, too.

justin84, first, a faculty room nicer than a resaurant is a pretty vague metric on which to grade the wastefullness of a building. I mean, is it better than a KFC or better than one of those places that foodies are always going on about? And how much of the $500 million went into that room? Is the school using it to try to attract better teacher candidates? Are they getting better candidates? Expensive and wasteful aren't the same things, and individual expenditures like a nice faculty room aren't enough to prove that government's gond wild.

And we should keep in mind that the school in L.A., and most of these expensive school projects, are paid for by voter-approved bonds which are passed specifically for these projects. There wouldn't be a facy new school in L.A. if the citizenry hadn't agreed to pay for it.

Chris_, one of the most screwed up things about New Jersey is how many tiny municipalities there are, sandwiched all together. If we had half as many municipalities and school districts, combining the services provided by each smaller municipality, we'd be much better off.

"That's just simply false and misunderstands the situation. The projects are funded via bonding. Voters like new shiny things, so they vote for them. That's not coercion, but it's not good budgeting, either."

Chris,

How are the principal and interest payments on these bonds made? Do people who vote nay get to tell the tax collector to get lost?

justin84, of course not. The people that voted nay lost the vote. The ayes carried it, so the community has agreed to pay. That's how majority votes work. I suppose the "nay" voters could move to another community, but if they're going to live there they're going to have to pay for the school.

"justin84, first, a faculty room nicer than a resaurant is a pretty vague metric on which to grade the wastefullness of a building. I mean, is it better than a KFC or better than one of those places that foodies are always going on about? And how much of the $500 million went into that room? Is the school using it to try to attract better teacher candidates? Are they getting better candidates? Expensive and wasteful aren't the same things, and individual expenditures like a nice faculty room aren't enough to prove that government's gond wild."

MosBen,

You've got to be kidding me. The school is $500 million. In all likelihood, kids will be dropping out more or less at the same rate as they were in the previous building. A nice building does not change culture. You know what attracts good teachers? A good program and a good school culture. In any case, most states and cities do not have the money to spend - it doesn't matter what some knucklehead think might attract good teachers - the money simply isn't there.

KIPP managed to build a high school for $6.15 million. That's private sector vs. government for you. On time and under budget.

"You can mount up on your peace ponies, pull on the tie dyed shirts, arm yourselves with bouquets of pansies and go to Afghanistan."

RisingTide,

I'd just leave the Afghanis to their own devices, and we should have a military strong enough to suggest to foreign nations what we be left to ours.

A few quotes from Washington's farewell address:

"Observe good faith and justice toward all nations. Cultivate peace and harmony with all. Religion and morality enjoin this conduct, and can it be that good policy does not equally enjoin it? It will be worthy of a free, enlightened, and at no distant period a great nation to give to mankind the magnanimous and too novel example of a people always guided by an exalted justice and benevolence. Who can doubt that in the course of time and things the fruits of such a plan would richly repay any temporary advantages which might be lost by a steady adherence to it? Can it be that Providence has not connected the permanent felicity of a nation with its virtue? The experiment, at least, is recommended by every sentiment which ennobles human nature. Alas! Is it rendered impossible by its vices?"

"The great rule of conduct for us in regard to foreign nations is, in extending our commercial relations to have with them as little political connection as possible. So far as we have already formed engagements let them be fulfilled with perfect good faith. Here let us stop."

"Taking care always to keep ourselves by suitable establishments on a respectable defensive posture, we may safely trust to temporary alliances for extraordinary emergencies."

"justin84, of course not. The people that voted nay lost the vote. The ayes carried it, so the community has agreed to pay. That's how majority votes work. I suppose the "nay" voters could move to another community, but if they're going to live there they're going to have to pay for the school."

Then the method of finance doesn't matter - the state forces other people to pay, and the assertion by Chris that no coercion is involved doesn't hold.

^^ But it does matter. Voters like cool new things (for better or worse); conservative politicians keep slashing state and local budgets.

The first is *not* coercion, but it is still not good when combined with our terrible way of funding state/local government. Still, it's tiny bit better than just cutting everything all the time, which is the conservative way of doing things. Better to spend too much building infrastructure and not enough to support it than to spend too little on both.

The old-style conservative way of "running government like a business" and actually running it well -- with funded services and systems that make sense -- is what I'd wish Republicans would go back to. Policy, data-driven stuff.

Places like Singapore are routinely ranked as the most efficient, cost-effective bureaucracies. They focus on doing what works (such as matching white collar pay for bureaucrats -- omg socialism!), rather than dogma about evil government stealing your $$. I wish conservatives would spend more time discussing *why* that LA school exists where it does, why it doesn't exist elsewhere, and how we can better design systems to make important services not dependent on the power of a community/school district to further entrench wealth. Saying that the guvmint is stealing your money doesn't actually solve anything and isn't persuasive to anyone.

That's stretching to the word "coercion" to a pretty unnatural extreme. Nobody is forcing people to live in that community. If they don't want to pay for that school then they are free to move. You don't get to opt out of taxes because you're the one guy that said you didn't wan't 'em, or because some money is being spent on something you don't like. This isn't tyranny; there was a vote and the majority of the community said that they're going to build a $500 million school.

"Some have not feared to assert that a people can never outstep the boundaries of justice and reason in those affairs which are peculiarly its own; and that consequently full power may be given to the majority by which it is represented. But this is the language of a slave." de Tocqueville

@justin84: Note about the KIPP high school constructed by the "oh so efficient" private sector. According to the Interwebs, it has a graduating class of about 90, so probably serves around 400 students, rather than 4200.

So you've already exaggerated the efficiency differential by about 10 times. But it gets worse. On the site you link to, in the "story behind the project" page, it points out that during construction, the greatest care was taken to keep students safe and not interfere with their classes.

In other words, the $6M figure wasn't for a new high school. It was for an expansion of an existing building.

Also, the KIPP school really looks like a red metal box having a painfully dull conversation with a white metal box. It would be right at home in any impoverished industrial area. The LA school is a budgetary nightmare, but at least the kids will feel like there is a "where" to go to school to.

So you have one set of students going to a school that's shamefully opulent, and another group of students warehoused in the cheapest metal box they could build that passed Texas's presumably lax building codes. Which would you rather go to?

Me, I'd take the one with a student body of 400. 4000 kids in one building is just a terrible, terrible idea.

Mr. Klein: Contrary to your erroneous assertion that rural communications providers oppose retooling universal service fund (USF) support mechanisms to fit today’s broadband world, our nation’s small, rural telcos have been strong and consistent advocates of the need to reform USF to meet our country’s communications needs well into the future—and to sustain that progress. In fact, that has been the consensus of small rural telco industry representatives for some time, as evidenced most recently by my testimony on behalf of several of these associations at a House hearing on the subject last year.

USF has enabled small rural providers to build networks that support a wide array of services—including fixed broadband, as well as the wireless broadband and voice-over-Internet services that you mention. Small rural telephone companies believe, as you do, that online connectivity is an economic necessity, and they are committed to ensuring the same levels of connectivity in rural America as those available in urban areas.

A USF system that supports deployment and continued operation of robust, future-proof, broadband-capable networks in the nation’s hardest-to-serve areas is essential to making universal broadband a reality.

"According to the Interwebs, it has a graduating class of about 90, so probably serves around 400 students, rather than 4200. So you've already exaggerated the efficiency differential by about 10 times."

So, the size differential doesn't matter at all to my argument - the KIPP school was far far far cheaper. It's the difference between a Hyundai Accent for the KIPP kids and an S class Mercedes for the LA kids.

Spending per student is 3x higher for LA than KIPP ($25,208 vs $8,390).

http://www.cato.org/pubs/pas/pa662.pdf

"On the site you link to, in the "story behind the project" page, it points out that during construction, the greatest care was taken to keep students safe and not interfere with their classes.

In other words, the $6M figure wasn't for a new high school. It was for an expansion of an existing building."

Clever use of cherry picking. Did you click 'Owner's Vision'? The very first sentence is:

*The new KIPP Academy High School was constructed on an existing KIPP property that houses district offices, a gymnasium, a middle school and temporary classrooms.*

So yes, it's a new school. The kids taking classes during construction were in the Middle School.

"Also, the KIPP school really looks like a red metal box having a painfully dull conversation with a white metal box. It would be right at home in any impoverished industrial area."

So what? It's a school! It's not supposed to look flashy! Despite popular belief, what a school looks like has no bearing on educational outcomes. The kids are supposed to be INSIDE the building for most of the day!

"The LA school is a budgetary nightmare, but at least the kids will feel like there is a "where" to go to school to. Despite popular belief, what a school looks like has no bearing on educational results."

Yes, education is all about kids *feeling* like they have a place to go.

"So you have one set of students going to a school that's shamefully opulent, and another group of students warehoused in the cheapest metal box they could build that passed Texas's presumably lax building codes. Which would you rather go to?"

Anyone with a will to learn would choose KIPP. You'd actually, you know, learn something and graduate. Far less likely in LA public schools.

I mean seriously, all you really have here is that the KIPP school looks dull and Texas (might) have lax building codes, as if a school couldn't be built properly without state guidance.

"Me, I'd take the one with a student body of 400. 4000 kids in one building is just a terrible, terrible idea."

"That's stretching to the word "coercion" to a pretty unnatural extreme. Nobody is forcing people to live in that community. If they don't want to pay for that school then they are free to move."

MosBen,

"the act of coercing; use of force or intimidation to obtain compliance."

http://dictionary.reference.com/browse/coercion

If I don't pay, and resist all of the various legal actions leveled against me, I'm pretty sure the state is going to use force.

By the way, if some guy came up to you with a gun, and demanded that you pay him $10,000 or get out of town, what would you call it if not coercion? The fact that he lets you leave doesn't not eliminate the coercion.

"You don't get to opt out of taxes because you're the one guy that said you didn't wan't 'em, or because some money is being spent on something you don't like."

No, because the government uses force to make sure the taxes are paid. It's coercion. You might be okay with this coercion, but that's undeniably what's going on here.

"This isn't tyranny; there was a vote and the majority of the community said that they're going to build a $500 million school."

If the majority of the community voted to take your house and bank accounts and use them to fund a school, would that constitute a tyranny?

Why can't people who get all dew-eyed over a half billion school fund the place themselves?

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